Hyderabad: A farmer claims Rs 7 lakh per acre agricultural income and another Rs 1 lakh per acre in rental income for farmland in and around Hyderabad for tax exemption. But now, using satellite imagery, the income tax (I-T) department has found that these numbers don’t add up. Agricultural income is exempt from income tax, making it a tempting loophole for those looking to convert undisclosed wealth into legal income.
In the past few days, these ‘farmers’ are among nearly 50 individuals who have been served notice by the I-T investigation (Hyderabad) unit for agricultural earnings exceeding Rs 50 lakh per annum or an unusually high Rs 5 lakh or above per acre.
The Hyderabad unit’s probe is part of a nationwide crackdown on fraudulent agricultural income declarations. In many states, individuals reported farm income far beyond reasonable limits, spurring a reassessment of their tax returns. In Telangana and AP, the scrutiny is particularly focussed on landowners in Hyderabad and Visakhapatnam, where urban expansion has made farmland transactions highly lucrative.
Investigation in the two states revealed major discrepancies. Using satellite imagery, the I-T wing found some farm land over the years were not at all cultivated, while others were converted into real estate ventures where the sellers continued to claim tax-free agricultural income.
In 150 cases flagged for scrutiny, investigators found multiple instances where landowners declared large agricultural incomes without evidence of cultivation.
In one case, a taxpayer who sold agricultural land by converting it into plots continued to claim tax exemption on the transaction, treating it as farm income instead of business income.
Officials pointed out that exemptions on capital gains applied only to land genuinely used for farming, not land converted for real estate.
Under the law, rural agricultural income from farm produce or leasing land is tax exempt. However, income from selling urban agricultural land or repurposing farmland for non-agricultural activities is taxable. With notices issued and the probe underway, tax sleuths are tightening their grip on those misusing agricultural exemptions. Those unable to provide proof of genuine farming activity might face penalties and tax reassessments.
